Valuing Environmental Factors in Cost-Benefit Analysis Using Data Envelopment Analysis

By Timo Kuosmanen, Mika Kortelainen. Social Science Research Network, 2006

131 citations recorded by the source corpus.

Environmental cost-benefit analysis (ECBA) refers to social evaluation of investment projects and policies that involve significant environmental impacts. Valuation of the environmental impacts in monetary terms forms one of the critical steps in ECBA. We propose a new approach for environmental valuation within ECBA framework that is based on data envelopment analysis (DEA) and does not demand any price estimation for environmental impacts using traditional revealed or stated preference methods. We show that DEA can be modified to the context of CBA by using absolute shadow prices instead of traditionally used relative prices. We also discuss how the approach can be used for sensitive analysis which is an important part of ECBA. We illustrate the application of the DEA approach to ECBA by means of a hypothetical numerical example where a household considers investment to a new sport utility vehicle.

Subfields: Economics and Econometrics, Management Science and Operations Research, Transportation

View Paper: https://www.semanticscholar.org/paper/d586efc2337ba30c788abc8ed7a35bba22f56d8b

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In Economics and Econometrics

1. W. Fichtner
2. Patrick Jochem
3. C. Doll

In Management Science and Operations Research

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2. Patrick Jochem
3. C. Doll

In Transportation

1. W. Fichtner
2. Patrick Jochem
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Citations in the corpus

• External costs of electric vehicles (2016, methodology): “The development of new methods (e.g. with the help of data envelopment analysis) is continuing (Kuosmanen and Kortelainen, 2007).”